Debentures

Debenture Holder Remedies

- Sue for money - Petition for administration - Petition for winding up - Exercise any powers conferred by the debenture or trust deed e.g. appoint a manager to represent - Apply to the court for them to decide what is appropriate

What is a charge?

A charge is a claim to an asset effective on the company default of a loan. Chargers are held by those lenders that have security

Registration of Charges

A company can enforce a promise to take a debenture through a court order where a recognisable promise has been given. There is no obligation to maintain a register of debenture holders, but there is an obligation to register the charges.

Payee

A person to whom a check is written

collateral

A security pledged for the repayment of a loan.

negotiable instrument

A written promise or order to pay a specific sum of money that may be transferred by endorsement or delivery. The transferee then has the original payee's right to payment.

What is a debenture?

An acknowledgement of corporate indebtedness. A simple borrowing/lending transaction.

What are the two types of charges?

S860 - 877 CA and s248 Insolvency Act provide the two types of charges as fixed and floating

Floating Charges

The definition provided by Romer LJ in the YORKSHIRE WOOLCOMBERS case: 1. Equitable - can be more than one claimant 2. Relates to a class of assets - e.g. 'all the machines' 3. Company can sell/deal with the items in the class - can sell, do what they wish in the ordinary course of business 4. Remains dormant until crystallised 5. Additional charges over the same assets are allowed Automatic bottle makers - on part of class Cope & Sons - on all of class 6. That created as a fixed charge may be a floating one - be careful with the wording, an item not sufficiently identified may be a floating charge 7. A legal charge with priority can be created over a floating charge - the lender jumps to the front of the queue as in Wheatley v Silkstone

What are the two types of debentures?

Under s741 you can have redeemable and irredeemable debentures. Redeemable - identified and described Irredeemable - repayment takes place on the happening of an event

promissory note

a written contract with a promise to pay a supplier a specific sum of money at a definite time

Subscriber

one who writes his or her name at the end of a document, thereby indicating approval; one who regularly receives a magazine, newspaper, etc.

Stocks

shares of ownership in a company

Securities

stocks and bonds

payable

that which must be paid or can be paid

drawer

the person who signs a check

Fixed Charges

these charges attach to an identifiable asset. The company cannot sell that asset and it is recognised as a 'legal charge.'

Content of a debenture document

Monetary sum, is it part of an isolated loan or a larger borrowing, redemption, transferability, interest rate and security.

bill of exchange

An order written by an exporter instructing an importer, or an importer's agent, to pay a specified amount of money at a specified time.

Ali v Top

Certificate of Reg issued in error, but treated as valid. Details on reg were wrong but the charge was observed as valid

Bonds

Certificates of debt that carry a promise to buy back the bonds at a higher price

Security of a debenture

Does not have to be provided. It is a back up where there funds are not available - offering the lenders assets in the company.

Re Joplin

Late registration is allowed but can require a provision that the rights of any party acquired before registration are not prejudiced.